As the countdown to the goods and services tax (GST) begins, CNBC-TV18 spoke to top industry leaders on how they have prepared for this mega tax overhaul.
The company, its dealers, tier I suppliers are ready for GST at least on paper because unless the button is pushed one will not know what is not working, said Pawan Goenka, MD, Mahindra and Mahindra.
He said, there was no pilot run and so it would be unrealistic to expect a smooth transition. Therefore, there could be a bit of chaos in switching from excise to GST.
He is hopeful that in a couple of months everything will settle down and the transition pain will be forgotten.
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According to him, GST is a bigger change for service providers than the manufactures and so there could be some disturbances with tier 2 and tier 3 suppliers.
There is no doubt that the auto sector will have to take some financial hit due to this transition, and for the company per se, he foresees a 6 percent loss on account of non-refund of some input credits.
He said, typically the auto and tractor industry have 4-5 weeks of inventory at the dealer end and in addition to that over one week of inventory in stock yards in various states. However, the company is trying hard to reduce the inventory by tonight, at least by some number.
He also clarified that the hit will not be on commercial vehicles but the hit will be small on small cars and large on large cars.
He said bulk of the cost will be borne by the manufactures, which has been informed to the dealers since the dealers do not have deep pocket. The dealers usually have 3-3.5 margin on each product, he added.
However, the company aims to recovery this cost because they cannot afford another loss after absorbing the loss on account of BS III, said Goenka.
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